If because they expect the central bank to disinflate, people reduce their inflation expectations, then is the sacrifice ratio larger or smaller the otherwise? Defend your answer by referring to the Phillips curve


The sacrifice ratio will be smaller because unemployment will rise by less. Unemployment will rise by less because if expected inflation falls, the short run Phillips curve shifts left which means that the unemployment rate will be lower at any given level of inflation.

Economics

You might also like to view...

If ________ GDP exceeds ________ GDP, employment exceeds its full-employment level and the unemployment rate is ________ the natural unemployment rate

A) real; nominal; below B) real; potential; below C) real; potential; above D) nominal; potential; above E) nominal; potential; below

Economics

As the level of output increases, what happens to the value of average fixed cost, and what happens to the difference between the value of average total cost and average variable cost?

What will be an ideal response?

Economics

If resale price maintenance leads to a shift in the market demand that exceeds the shift in the market supply, the quantity of the good sold will ________ and the manufacturer's profit will ________.

A) decrease; decrease B) decrease; increase C) increase; increase D) increase; decrease

Economics

Which of the following is an example of moral hazard?

A. A college student drinking alcohol and partying instead of studying. B. A homeowner with fire insurance not clearing bush around their property. C. A chronically sick person using hospital services. D. A chronically sick person buying more health insurance than average.

Economics